Once every four years, the Bitcoin community marks the Bitcoin halving as a significant occasion. This event is widely regarded by crypto market analysts as a quadrennial milestone, given its historical tendency to boost the overall Bitcoin market.
Approaching Bitcoin’s fourth halving on April 19, which is just around the corner in the cryptocurrency market, here are five intriguing aspects of this event that may surprise experienced crypto fans.
Bitcoin price’s up over 650,000% since the first halving
In the past, Bitcoin’s value has typically risen after a halving event. However, this trend depends significantly on the relationship between the amount of Bitcoin in circulation and the market’s desire for it.
Following Bitcoin’s first halving on Nov. 28, 2012, the digital currency’s value increased significantly. It went from $11 to its previous peak of $1,240 within a year. Likewise, after the second halving in July 2016, Bitcoin experienced another remarkable surge. Its price rose from approximately $650 to an unprecedented high of $20,000 by December 2017.
Beginning in May 2020, following the third Bitcoin halving, the value of Bitcoin surged from approximately $8,800 to a staggering $69,000 by November 2021. This represents an incredible return on investment of over 650,000% since the initial halving event.
In simpler terms, the reduction of Bitcoin supply due to halving occasions has led to increased interest and investment in the cryptocurrency. For example, during the years 2020-2021, easy monetary policies adopted by central banks around the world boosted the price growth of Bitcoin.
Halvings test miners’ economic resilience
In simpler terms, as the number of transaction confirmations a miner handles is cut in half, their earnings decrease. This makes it harder for miners, particularly those with higher expenses, to turn a profit. As a result, they may need to invest in more efficient equipment or shut down their operations.
For example, following the third Bitcoin halving in May 2020, the average cost to extract one Bitcoin increased, as indicated by the upward trendline in the graph that follows.
Smaller businesses found it harder to afford the growing expenses of running an operation, which could lead to fewer competitors and a more concentrated market structure.
Pre-halving price rallies can be speculative
The anticipation of a Bitcoin halving often leads to speculative price increases.
In the half year leading up to the 2020 Bitcoin halving, its value rose more than 40% – from around $7,000 in November 2019 to roughly $10,000 by May 2020.
Speculative investors frequently fuel these profits, aiming to take advantage of the typical price rise following a halving event, as observed historically, resulting in market instability.
The reason for Bitcoin’s price surge after a halving event is due to a sudden drop in supply. Specifically, the number of new Bitcoins created daily has been cut in half with each of the last three halvings (from 50 to 25 then 12.5), and most recently in 2020, to just 6.25 BTC per block. This reduction could result in notable price fluctuations if the demand for Bitcoin stays robust.
In the year after the 2016 Bitcoin halving event, its price experienced an approximately 300% increase. This significant price hike can be partially explained by the resulting supply shortage caused by the halving.
Macroeconomic impact on Bitcoin halving cycles
In simple terms, the larger economic scenario significantly influences how Bitcoin’s price is affected by its halving events.
In simple terms, during the same time that Bitcoin underwent its 2020 halving, easy monetary policies were in place worldwide, such as extremely low interest rates in the U.S. This unusual combination of events made Bitcoin an increasingly attractive alternative to traditional safe-haven assets like gold, causing its price to rise significantly from roughly $8,000 following the May 2020 halving to a record high of almost $69,000 by November 2021.
Last Bitcoin halving will occur next century
The halving mechanism in Bitcoin mining is expected to result in the final bitcoin being mined approximately in the year 2140. Following this last halving event, miners will no longer obtain fresh BTC as rewards but instead must depend exclusively on transaction fees for their earnings.
A significant transformation in Bitcoin’s foundation could have far-reaching impacts on its security and economic structure. Consequently, aspects such as miner involvement and transaction fees might be noticeably affected.
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2024-04-19 14:37